Question: Asset acquisition (fair value is different from book value) The following financial statement information is for an investor company and an investee company on January
Asset acquisition (fair value is different from book value)
The following financial statement information is for an investor company and an investee company on January 1, 2013. On January 1, 2013, the investor company's common stock had a traded market value of $42 per share, and the investee company's common stock had a traded market value of $19 per share.
| Book Values | Fair Values | |||
|---|---|---|---|---|
| Investor | Investee | Investor | Investee | |
| Receivables & inventories | $240,000 | $120,000 | $216,000 | $108,000 |
| Land | 480,000 | 240,000 | 720,000 | 360,000 |
| Property & equipment | 540,000 | 240,000 | 600,000 | 312,000 |
| Trademarks & patents | _ | _ | 360,000 | 192,000 |
| Total assets | $1,260,000 | $600,000 | $1,896,000 | $972,000 |
| Liabilities | $360,000 | $192,000 | $432,000 | $228,000 |
| Common stock ($1 par) | 72,000 | 40,000 | ||
| Additional paid-in capital | 648,000 | 344,000 | ||
| Retained earnings | 180,000 | 24,000 | ||
| Total liabilities & equity | $1,260,000 | $600,000 | ||
| Net assets | $900,000 | $408,000 | $1,464,000 | $744,000 |
Assume that the investor company issued 18,000 new shares of the investor company's common stock in exchange for all of the individually identifiable assets and liabilities of
A. $12,000
B. $0
C. $156,000
D. $348,000
Choose from the answers above only
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
Study Help